Union Properties Public Joint Stock Company and its ... · Union Properties Public Joint Stock...

Union Properties Public Joint Stock Company and its subsidiaries

Consolidated financial statements 31 December 2018

Union Properties Public Joint Stock Company and its subsidiaries Consolidated financial statements 31 December 2018 Contents Page(s) Directors’ report ......................................................................................................................................... 1 Independent auditor’s report ............................................................................................................. 2-10 Consolidated statement of profit or loss and other comprehensive income ......................................... 11 Consolidated statement of financial position .......................................................................................... 12 Consolidated statement of cash flows.................................................................................................... .13 Consolidated statement of changes in equity ......................................................................................... 14 Notes to the consolidated financial statements.............................................................................. 15 – 78

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Union Properties Public Joint Stock Company and its subsidiaries Consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2018

2018 2017

Notes AED’000 AED’000

Revenue from contracts with customers 5 500,988 484,607

Net loss on financial instruments at FVTPL 11 (1,787) (1,619)

Gain on disposal of a joint venture 24 125,014 -

Share of profit of equity accounted investees 24 16,380 3,580

Gain/(loss) on valuation of properties, net 9 86,404 (2,075,698)

Finance income 4,102 10,705

Other income 7 119,700 142,557

Direct costs 5 (382,063) (716,218)

Administrative and general expenses 6 (282,251) (157,279)

Finance cost (124,158) (65,855)

Profit/(loss) for the year attributable to the shareholders of

the Company 62,329 (2,375,220)

Other comprehensive income for the year 8 390,011 - Total comprehensive income/(loss) for the year 452,340 (2,375,220)

Basic and diluted earnings per share (AED) 26 0.015 (0.554)

The notes from 1 to 32 form an integral part of these consolidated financial statements.

The independent auditor’s report is set out on the pages 2 to 10.

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Consolidated statement of cash flows For the year ended 31 December 2018

2018 2017


Operating activities

Profit/(loss) for the year 62,329 (2,375,220)

Adjustments for:

Depreciation 8 12,928 16,947

(Gain)/loss on fair valuation of investment properties 9 (86,404) 2,075,698

Share of profit of equity accounted investees 24 (16,380) (3,580)

Provision for slow moving inventories - 45,927

Provision for doubtful debts 29 13,264 599

Reversal of development properties provision 12 (9,420) -

Gain on disposal of property, plant and equipment 8 - (589)

Loss on financial instruments at FVTPL 11 1,787 1,619

Gain on disposal of a joint venture (125,014) -

Finance income (4,102) (10,705)

Finance cost 124,158 65,855

Operating loss before working capital changes (26,854) (183,449)

Change in inventories (212) 9,261

Change in contract assets 9,836 22,378

Change in trade and other receivables (52,281) 151,798

Change in due from related parties 11,946 (18,547)

Change in trade and other payables and contract liabilities (16,702) 118,224

Change in due to related parties - (4,386)

Change in development properties 43,622 -

Change in staff terminal benefits - net (5,017) (14,212)

Net cash (used in)/generated from operating activities (35,662) 81,067

Investing activities

Additions to property, plant and equipment 8 (15,990) (19,324)

Additions to investment properties 9 (32,500) (198,906)

Additions to development properties 12 (2,792) -

Purchase of financial instruments at FVTPL 11 (940,233) (111,878)

Proceeds from sale of financial instruments at FVTPL 11 359,422 190,408

Dividend received - 20,000

Proceeds from disposal of a joint venture 500,000 -

Proceeds from disposal of property, plant and equipment - 204

Interest received 4,102 5,771

Change in deposit with banks (31,583) 10,407

Net cash used in investing activities (159,574) (103,318)

Financing activities

Long-term bank loans availed 20 485,110 241,892

Repayment of bank loans 20 (450,873) (95,314)

Interest paid (83,063) (65,256)

Net cash (used in)/generated from financing activities (48,826) 81,322 Net (decrease)/increase in cash and cash equivalents (244,062) 59,071 Cash and cash equivalents at the beginning of the year 67,488 8,417 Cash and cash equivalents at the end of the year 16(a) (176,574) 67,488



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Union Properties Public Joint Stock Company and its subsidiaries Consolidated statement of changes in equity For the year ended 31 December 2018

Share

capital

Statutory

reserve

General

reserve

Asset

revaluation

surplus

(Accumlated

losses)/retained

earnings Total

AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

At 1 January 2017 3,971,796 326,647 313,697 - 417,898 5,030,038

Total comprehensive income for the year - - - - (2,375,220) (2,375,220)

Other equity movements

Issuance of bonus shares (refer note 22) 317,744 - - - (317,744) -

Transfer of general reserve (refer note 23) - - (313,697) - 313,697 -

At 31 December 2017 4,289,540 326,647 - - (1,961,369) 2,654,818

At 1 January 2018 4,289,540 326,647 - - (1,961,369) 2,654,818

Total comprehensive income for the year - - - 390,011 62,329 452,340

Other equity movements

Transfer to statutory reserve (refer note 23) - 6,233 - - (6,233) -

At 31 December 2018 4,289,540 332,880 - 390,011 (1,905,273) 3,107,158



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Notes to the consolidated financial statements

1 LEGAL STATUS AND PRINCIPAL ACTIVITIES

Union Properties Public Joint Stock Company (“the Company”) was incorporated on 28 October 1993 as a public joint stock company by a United Arab Emirates Ministerial decree. The Company’s registered office address is P.O. Box 24649, Dubai, United Arab Emirates (“UAE”).

The principal activities of the Company are investment in and development of properties, the management and maintenance of owned properties including the operation of cold stores, the undertaking of property related services on behalf of other parties (including related parties) and acting as the holding company of its subsidiaries and investing in other entities as set out in note 2.1.

The Company and its subsidiaries are collectively referred to as “the Group”.

2 BASIS OF PREPARATION

2.1 Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB) and the requirements of the UAE Federal Law No. (2) of 2015.

2.2 Basis of measurement

The consolidated financial statements of the Group have been prepared on the historical cost convention basis except for investment properties and investments at fair value through profit or loss that have been measured at fair value. 2.3 Comparative information The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Group presents an additional statement of financial position at the beginning of the preceding period when there is a retrospective application of an accounting policy, a retrospective restatement, or a reclassification of items in the consolidated financial statements. An additional consolidated statement of financial position as at 1 January 2017 was not presented in these consolidated financial statements, given that the effect of the retrospective application of accounting policies as a result of the adoption of new accounting standards was not significant (note 3.2).

2.4 Basis of consolidation

These consolidated financial statements comprise the financial statements of the Company and its subsidiaries at 31 December 2018, as set out below:

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Notes to the consolidated financial statements (continued)

2 BASIS OF PREPARATION (CONTINUED)

2.4 Basis of consolidation (continued)

Entity Incorporated in Principal activities

2018 2017

Subsidiaries

Thermo LLC UAE 100% 100%

Contracting of mechanical, electrical, and

plumbing works of building projects, facilities

management services.

Gulf Mechanical A/C Acoustic

Manufacturing (GMAMCO) LLCUAE 100% 100%

Central air-conditioning, requisites

manufacturing, fire fighting equipment

assembling.

Gmamco Trading LLC UAE 100% 100%

Fire fighting & safety equipment trading, air

condition trading, pumps, engines, valves &

spare parts trading, water heaters trading,

lighting equipment requisites trading.

Gmamco Saudi LLC KSA 100% 100%

Central air-conditioning, requisites

manufacturing, fire fighting equipment

assembling.

ServeU LLC UAE 100% 100%

Facilities management, security, mechanical,

electrical and plumbing works and energy


Dubai Autodrome LLC UAE 100% 100%

Building, management and consultancy for all

types of race tracks and related developments

for all types of motor racing.

The Fitout LLC UAE 100% 100% Manufacturing and interior decoration.

Thermo Saudi LLC KSA 100% 100%

Contracting of mechanical, electrical, and

plumbing works of building projects, facilities


Thermo OPC Qatar 100% 100%

Contracting of mechanical, electrical and

plumbing works of building projects and

facilities management services.

Union Holdings UAE 100% 100% Investment in equities.

UPP Capital Investment UAE 100% 100% Investment in equities.

Union Malls UAE 100% 100% Facilities management services.

UPP Investments LLC UAE 100% 100% Investment in equities.

Al Etihad Education UAE 100% 100%Investment in educational enterprises

& management.

UPP International Investments

LLCUAE 100% 100% Investment in equities.

Joint venture and associates

Properties Investment LLC UAE 30% 30%Investment in and development of properties

and property related activities.

Emirates District Cooling LLCUAE - 50%

Constructing, installing and operating cooling

and conditioning systems.

Palm Hills Development PJSC Egypt 12.47% -Investment in and development of properties

and property related activities.

Effective ownership

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2.4 Basis of consolidation (continued)

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in full in preparing these consolidated financial statements. 2.5 Functional and presentation currency

The consolidated financial statements are presented in United Arab Emirates Dirhams (“AED”), which is the Group’s functional currency. All amounts have been rounded to the nearest thousand (“AED’000”), except when otherwise indicated. 2.6 Use of estimates and judgements

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are described in note 30. 2.7 Fair Value Measurement

The Group measures certain financial instruments such as financial assets at FVTPL, and certain non-financial assets such as investment properties, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability; or

• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

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2.7 Fair Value Measurement (continued) A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities.

• Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

For assets and liabilities that are recognised in the consolidated financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group has an established control framework with respect to the measurement of fair values. This includes a management team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values. The management team regularly reviews significant unobservable inputs and valuation adjustments. External valuers are involved for valuation of significant assets, such as investment properties. If third party is used to measure fair values, the management team discusses with the valuer the valuation techniques and inputs to use and assesses the evidence obtained from the third party to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

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2 BASIS OF PREPARATION (CONTINUED) 2.8 Financial Commitments

The Group’s loans and borrowings as at 31 December 2018 amounted to AED 1,776 million (AED 1,545 million of bank loans and AED 231 million of bank overdrafts). Furthermore, the Group has net current liabilities of AED 1,599 million as at the reporting date.

The management has analysed the Group’s liquidity position over a period of 12 months from the reporting date. Based on the Group’s available funding facilities, forecasted cash inflows from operations, contractual loan maturities, debt service costs, estimated and committed capital expenditure, and liquid investments management has not identified a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern or to meet its future obligations.

The Board of Directors has reviewed the Group’s cash flow projections and concluded that the Group will be able to meet its commitments as they fall due in the foreseeable future.

3 SIGNIFICANT ACCOUNTING POLICIES

3.1 Summary of significant accounting policies Associates and joint ventures

Associates are those entities over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in its associates and joint venture are accounted for using the equity method.

Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects the Group’s share of the results of operations of the associates and joint venture. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associates or joint venture. The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the consolidated statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.

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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1 Summary of significant accounting policies (continued) Associates and joint ventures (continued) The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss within ‘Share of profit of associates and a joint venture’ in the consolidated statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Current versus non-current classification The Group presents assets and liabilities in the consolidated statement of financial position based on current/non-current classification. An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle

• Held primarily for the purpose of trading

• Expected to be realised within twelve months after the reporting period or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current. A liability is current when:

• It is expected to be settled in the normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within twelve months after the reporting period or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

The Group classifies all other liabilities as non-current.

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3.1 Summary of significant accounting policies (continued) Revenue from contracts with customers

The Group is in the business of development, sale and leasing of properties as well as involved in manufacturing, contracting, trading and services activities. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer. The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts with customers are provided in Note 30. Trading activities

Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods. The normal credit term is 30 to 90 days upon delivery.

Contracting activities Revenue from contracts for mechanical, electrical and plumbing works as well as from interior architecture is recognised over time using an input method (note 3) to measure progress towards complete satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the Group. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g., delivery, installation, warranties etc.). In determining the transaction price, the Group considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any). Variable consideration If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Contracts with customers specify that the Group is liable to pay penalty or for liquidated damages if certain conditions specified in the contract are not met for reasons not attributable to the customer. This penalty amount may vary for different contracts and/or customers. When the Group identifies the existence of variable consideration, it will estimate the amount of the consideration at contract inception by using the expected value approach and recognise a liability for the expected future losses.

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3.1 Summary of significant accounting policies (continued) Revenue from contracts with customers (continued) Contracting activities (continued) Contract modifications Variation orders or modifications to original contracts are common to the Group considering the long-term contracting nature of business. The terms for variation orders are defined in each contract. Generally, variations are priced by reference to the per unit rates agreed in the contract and the revised quantities required for the completion of the contract. In accordance with IFRS 15, the Group will account for a modification through a cumulative catch-up adjustment if the goods or services in the modification are not distinct and are part of a single performance obligation that is only partially satisfied when the contract is modified. Alternatively, the Group will account for a contract modification as a separate contract if the scope of contract increases due to addition of distinct goods or services and price of the contract increases by an amount that reflects the Group’s standalone selling prices. Warranty obligations The Group provides its customers warranty against defects arising from normal and/or expected usage and maintenance for a period of 1 year from the date of taking over certificates. Management assessed that 1 year warranty for defects are considered as an assurance type warranty as this warranty is necessary to ensure that the delivered products/services are as specified in the contract for a minimum period. There is no separate performance obligation for this warranty. The extended warranty which is given by the Group for a period longer than required by the normal practice, is usually for the purpose of detecting errors or defects in the work performed and is necessary to provide assurance that the goods or services comply with the agreed upon specifications, and accordingly, such warranties are treated as assurance type warranty. Otherwise, and in rare cases, such warranty will be treated as a service type warranty and thus will be considered as a separate performance obligation. Where warranty is considered as an assurance type warranty, the Group accrues for the cost of satisfying the warranty liability on the basis of historical experiences in accordance with the provisions of IAS 37. Facility management, maintenance and motor racing services Revenue from services are satisfied over time, because the customer simultaneously receives and consumes the benefits provided by the Group, on a fixed contract basis or using an input method to measure progress towards complete satisfaction of the service. Sponsorship fees related to motor racing events are recognised in the period in which the related event is held.

Rental income

Rental income from investment properties is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

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3.1 Summary of significant accounting policies (continued) Revenue from contracts with customers (continued) Revenue from sale of development properties

The Group satisfies a performance obligation and recognises revenue from sale of properties over time, if one of the following criteria is met:

• The customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs; or

• The Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

• The Group’s performance does not create an asset with an alternative use to the Group and the entity has an enforceable right to payment for performance completed to date.

For performance obligations where one of the above conditions are not met, revenue from the sale of properties is recognised at the point in time at which the performance obligation is satisfied. Contract balances

Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. Trade receivables A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets under the section Financial instruments – initial recognition and subsequent measurement. Contract liabilities A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.

Cost to obtain a contract The Group has elected to apply the optional practical expedient for costs to obtain a contract which allows the Group to immediately expense such costs (included in cost of sales) because the amortisation period of the asset that the Group otherwise would have used is one year or less.

Contract costs Contract costs comprise direct contract costs and other costs relating to the contracting activity in general and which can be allocated to contracts. In addition, contract costs include other costs that are specifically chargeable to the customer under the terms of the contracts.

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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.1 Summary of significant accounting policies (continued) Value added tax

Expenses and assets are recognised net of the amount of value added tax, except:

• When the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable

• When receivables and payables are stated with the amount of value added tax included The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated financial statements.

Foreign currency transactions

Transactions denominated in foreign currencies are initially recorded in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency using the closing rate. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. All foreign currency differences are recognised in the profit or loss. Finance income and expense

Finance income comprises interest income on fixed deposits and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in the profit or loss using the effective interest method.

Finance expense comprises interest expense on bank borrowings, changes in the fair value of financial assets at fair value through profit or loss and impairment losses recognised on financial assets. All borrowing costs, except to the extent that they are capitalised in accordance with the paragraph below, are recognised in the profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition or construction of qualifying asset are capitalised as part of the cost of that asset. The capitalisation of borrowing costs commences from the date of incurring of expenditure related to the asset and ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use is complete. Borrowing costs relating to the period after acquisition or construction are expensed.

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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.1 Summary of significant accounting policies (continued)

Property, plant and equipment and depreciation

Recognition and measurement

Other than land, items of property, plant and equipment are measured at cost less accumulated depreciation (refer below) and accumulated impairment losses (refer accounting policy on impairment), if any. Cost includes expenditure that is directly attributable to the acquisition of the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The cost of self constructed assets includes the cost of materials, direct labour and an appropriate proportion of overheads.

At 31 December 2018, land is measured at fair value less accumulated impairment losses recognised after the date of revaluation (2017: land is measured at cost less accumulated impairment losses). Valuation is performed with sufficient frequency to ensure that the carrying amount of a revalued asset does not differ materially from its fair value.

A revaluation surplus is recorded in OCI and credited to the asset revaluation surplus in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit and loss. A revaluation deficit is recognised in the consolidated statement of profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation surplus.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. Depreciation

Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows:

Assets Number of years

Buildings and leasehold improvements 3 to 20

Plant and machinery 5 to 10

Furniture, fixtures and office equipments 2 to 4

Motor vehicles 4

Equipment and tools 2 to 3

The depreciation method, useful lives and residual values are reassessed at the reporting date.

Capital work-in-progress

Capital work-in-progress is stated at cost less accumulated impairment losses (refer accounting policy on impairment), if any, until the construction is complete. Upon completion of construction, the cost of such asset together with the cost directly attributable to construction (including borrowing costs and land rent capitalised) are transferred to the respective class of assets. No depreciation is charged on capital work-in-progress.

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3.1 Summary of significant accounting policies (continued) Investment properties

Recognition

Land and buildings owned by the Group for the purposes of generating rental income or capital appreciation or both are classified as investment properties. Properties that are being constructed or developed for future use as investment properties are also classified as investment properties. Where the Group provides ancillary services to the occupants of a property, it treats such a property as an investment property if the services are a relatively insignificant component of the arrangement as a whole.

When the Group begins to redevelop an existing investment property for continued future use as an investment property, the property remains as an investment property, which is measured based on fair value model and is not reclassified as development property during the redevelopment with respect to as an investment property.

Measurement

Investment properties are initially measured at cost, including related transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Any gain or loss arising from a change in fair value is recognised in the profit or loss. Fair values are determined based on a semi-annual valuation performed by an accredited external independent valuer applying a valuation model recommended by the International Valuation Standards Committee

Where the fair value of an investment property under development is not reliably determinable, such property is measured at cost until the earlier of the date construction is completed and the date at which fair value becomes reliably measurable.

Transfer from development properties to investment properties

Certain properties held for sale under inventory are transferred from development properties to investment properties when those properties are either released for rental or for capital appreciation or both. The properties held for sale under development properties are transferred to investment properties at cost. Subsequent to initial recognition, such properties are valued at fair value in accordance with the measurement policy for investment properties.

Transfer from investment properties to development properties

When the use of investment properties changes to held for sale, the respective properties are transferred from investment properties to development properties at their fair values on the date of transfer, which becomes its deemed cost for subsequent accounting.

Derecognition

Investment properties are derecognised either when they have been disposed of (i.e., at the date the recipient obtains control) or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition. The amount of consideration to be included in the gain or loss arising from the derecognition of investment property is determined in accordance with the requirements for determining the transaction price in IFRS 15.

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Financial instruments – initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

i) Financial assets

Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), or fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15. Refer to the accounting policies in section Revenue from contracts with customers. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

Subsequent measurement Financial assets at amortised cost (debt instruments) The Group measures financial assets at amortised cost if both of the following conditions are met: • The financial asset is held within a business model with the objective to hold financial assets in order to

collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely

payments of principal and interest on the principal amount outstanding Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised cost includes trade receivables, retentions receivable, contract assets, rent receivable and due from related parties.

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Financial instruments – initial recognition and subsequent measurement (continued) i) Financial assets (continued)

Subsequent measurement (continued)

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the consolidated statement of financial position at fair value with net changes in fair value recognised in the consolidated statement of income. Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when: • The rights to receive cash flows from the asset have expired; or • The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation

to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

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Financial instruments – initial recognition and subsequent measurement (continued) i) Financial assets (continued) Impairment of financial assets

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables and contract assets, including receivables from sale of real estate properties that contain a significant financing component, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. ii) Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and contingent consideration at fair value through profit or loss.

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Financial instruments – initial recognition and subsequent measurement (continued) ii) Financial liabilities (continued) Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Trade and other payables Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Loans and borrowings After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. iii) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and at bank in current and deposit accounts (having a maturity of three months or less and excluding deposits held under lien). Bank overdrafts that are repayable on demand and bills discounted having a maturity of three months or less form an integral part of the Group’s cash management and are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

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Impairment of non-financial assets

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGUs fair value less costs to sell and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of one to five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses are recognised in the consolidated statement of other comprehensive income in expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated statement of other comprehensive income unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. Inventories

Inventories are valued at the lower of cost and net realisable value.

Properties held for sale

Properties held for sale are classified as inventories and stated at the lower of cost and net realisable value. Cost includes the aggregate cost of development, borrowing costs capitalised and other direct expenses. Net realisable value is estimated by the management, taking into account the expected price which can be ultimately achieved, based on prevailing market conditions.

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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.1 Summary of significant accounting policies (continued) Inventories (continued) Properties held for sale (continued) The amount of any write down of properties under development for sale is recognised as an expense in the period the write down or loss occurs. The amount of any reversal of any write down arising from an increase in net realisable value is recognised in profit or loss in the period in which the increase occurs.

Other inventories

The cost of other inventories is based on the first-in-first-out method and includes expenditure incurred in acquiring inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.

Provision

A provision is recognised in the consolidated statement of financial position when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provision for contract maintenance

Provision for contract maintenance is recognised when the underlying contract enters the maintenance period. The provision is made on a case-by-case basis for each job where the maintenance period has commenced and is based on historical maintenance cost data and an assessment of all possible outcomes against their associated probabilities.

Operating lease payments

Group as a lessee Leases of assets under which the lessor effectively retains all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are recognised in the profit or loss on a straight-line basis over the term of the lease. Lease incentives allowed by the lessor are recognised in the profit or loss as an integral part of the total lease payments made. Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.1 Summary of significant accounting policies (continued) Earnings per share

The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The results of the operating segments are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, costs incurred for purchase of investment properties or redevelopment of existing investment properties and costs incurred towards development of properties which are either intended to be sold or transferred to investment properties. 3.2 Changes in accounting policies and disclosures Revaluation of land under property, plant and equipment The Group re-assessed its accounting for property, plant and equipment with respect to measurement of land under property, plant and equipment after initial recognition. The Group had previously measured land under property, plant and equipment using the cost model whereby, after initial recognition of the asset classified as property, plant and equipment, the asset was carried at cost less accumulated impairment losses. In the last quarter of 2018, the Group elected to change the method of accounting for land classified as property, plant and equipment, as the Group believes that the revaluation model provides more relevant information to the users of its consolidated financial statements. In addition, available valuation techniques provide reliable estimates of land’s fair value. The Group applied the revaluation model prospectively. After initial recognition, land is measured at fair value at the date of the revaluation less any subsequent accumulated impairment losses. As a result of the change in the accounting policy, a revaluation adjustment of AED 390 million was recorded in OCI.

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3.2 Changes in accounting policies and disclosures (continued) New and amended standards and interpretations The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Although these new standards and amendments applied for the first time in 2018, they did not have a material impact on the annual consolidated financial statements of the Group. The nature and the impact of each new standard or amendment is described below:

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group applied IFRS 9 retrospectively, with the initial application date of 1 January 2018 and adjusting the comparative information for the period beginning 1 January 2017. However, the adoption of IFRS 9 did not have any impact on the Group’s consolidated financial statements, and accordingly, the comparative information was not restated.

Classification – financial assets

Under IFRS 9, debt instruments are subsequently measured at fair value through profit or loss, amortised cost, or fair value through OCI. The classification is based on two criteria: the Group’s business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding. The assessment of the Group’s business model was made as of the date of initial application, 1 January 2018. The assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets. The classification and measurement requirements of IFRS 9 did not have a significant impact on the Group. The Group continued measuring at fair value all financial assets previously held at fair value under IAS 39. Trade receivables and other current financial assets classified as Loans and receivables as at 31 December 2017 are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These are now classified and measured as Debt instruments at amortised cost. The Group has not designated any financial liabilities as at fair value through profit or loss. There are no changes in classification and measurement for the Group’s financial liabilities.

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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.2 Changes in accounting policies and disclosures (continued) New and amended standards and interpretations (continued) IFRS 9 Financial Instruments (continued)

Impairment

The adoption of IFRS 9 has fundamentally changed the Group’s accounting for impairment losses for financial assets by replacing IAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at fair value through profit or loss and contract assets.

Upon the adoption of IFRS 9, management performed an impairment loss assessment on the Group’s Trade and other receivables as at 1 January and 31 December 2017. However, the adoption of IFRS 9 did not result in any additional impairment losses to be recognised on the Group’s Trade and other receivables prior to the application date. IFRS 15 Revenue from Contracts with Customers

IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with its customers. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The Group adopted IFRS 15 using the full retrospective method of adoption. However, the effect of the adoption of IFRS 15 on the Group’s consolidated financial statements was limited to reclassification of certain items in the consolidated statement of financial position with no effect on the previously reported profit and net assets of the Group. In the consolidated statement of financial position, ‘Contract work in progress’ and ‘Deposits and advances’ have been categorised as ‘Contract assets’ and ‘Contract liabilities’, respectively, under IFRS 15, with no changes in the previously reported amounts, except for an amount of AED 5.6 million that was reclassified from Contract liabilities to Trade and other payables representing deposits received from customers without a corresponding performance obligation. The change did not have any impact on OCI or the consolidated statement of cash flows for the year ended 31 December 2017.

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3.2 Changes in accounting policies and disclosures (continued) New and amended standards and interpretations (continued)

IFRIC Interpretation 22 Foreign Currency Transactions and Advance Considerations The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the date of the transactions for each payment or receipt of advance consideration. This Interpretation does not have any impact on the Group’s consolidated financial statements.

Amendments to IAS 40 Transfers of Investment Property The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. These amendments did not have any impact on the Group’s consolidated financial statements given that all transfers from/to investment properties are based on evidence of the change in use.

Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. These amendments are not relevant to the Group.

Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts The amendments address concerns arising from implementing the new financial instruments standard, IFRS 9, before implementing IFRS 17 Insurance Contracts, which replaces IFRS 4. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from applying IFRS 9 and an overlay approach. These amendments are not relevant to the Group.

Amendments to IAS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice The amendments clarify that an entity that is a venture capital organisation, or other qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss. If an entity that is not itself an investment entity, has an interest in an associate or joint venture that is an investment entity, then it may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which: (a) the investment entity associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent. These amendments do not have any impact on the Group’s consolidated financial statements.

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3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.2 Changes in accounting policies and disclosures (continued) New and amended standards and interpretations (continued) Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Deletion of short- term exemptions for first-time adopters Short-term exemptions in paragraphs E3–E7 of IFRS 1 were deleted because they have now served their intended purpose. These amendments do not have any impact on the Group’s consolidated financial statements. Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s consolidated financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to make more extensive disclosures than under IAS 17. Transition to IFRS 16 The Group plans to adopt IFRS 16 retrospectively with the cumulative effect of initially applying IFRS 16, if any, recognised as an adjustment to the opening balance of retained earnings.

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Notes to the consolidated financial statements (continued) 3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.2 Changes in accounting policies and disclosures (continued) Standards issued but not yet effective (continued) IFRS 16 Leases (continued) Transition to IFRS 16 (continued) The Group will elect to use the exemptions proposed by the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value. The Group is in the process of finalizing the analysis of the impact of IFRS 16 at the date of issuance of these consolidated financial statements, and is planning to make use of one or more of the practical expedients allowed by the standard. In summary, the application of IFRS 16 is not expected to have a material impact on the Group’s consolidated financial statements given that the Group’s significant lease contracts are short-term in nature and the Group conducts its business operations primarily through owned properties. Other amendments and improvements The following amendments and improvements are not expected to have any significant impact on the Group’s consolidated financial statements when they become effective:

• IFRIC Interpretation 23 Uncertainty over Income Tax Treatments: effective for annual periods beginning on or after 1 January 2019

• Prepayment Features with Negative Compensation - Amendments to IFRS 9: effective for annual periods beginning on or after 1 January 2019

• Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28: effective for annual periods beginning on or after 1 January 2019

• Plan Amendment, Curtailment or Settlement - Amendments to IAS 19: effective for annual periods beginning on or after 1 January 2019

• AIP IFRS 3 Business Combinations - Previously held Interests in a joint operation: effective for annual periods beginning on or after 1 January 2019

• AIP IFRS 11 Joint Arrangements - Previously held Interests in a joint operation: effective for annual periods beginning on or after 1 January 2019

• AIP IAS 12 Income Taxes - Income tax consequences of payments on financial instruments classified as equity: effective f or annual periods beginning on or after 1 January 2019

• AIP IAS 23 Borrowing Costs - Borrowing costs eligible for capitalisation: effective for annual periods beginning on or after 1 January 2019

• The Conceptual Framework for Financial Reporting: effective for annual periods beginning on or after 1 January 2020

• IFRS 17 Insurance Contracts: effective f or annual periods beginning on or after 1 January 2021, with early application permitted

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28

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4 FINANCIAL RISK MANAGEMENT AND CAPITAL MANAGEMENT

Overview The Group has exposure to the following risks from its use of financial instruments:

• Credit risk;

• Liquidity risk; and

• Market risk.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Furthermore, quantitative disclosures are included throughout these consolidated financial statements.

The Board of Directors has an overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the products offered.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Trade receivables and contract assets Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables and contract assets are regularly monitored. At 31 December 2018 and 2017, the Group had receivables from a large number of customers. The Group is exposed to credit risk on receivables from real estate property sales as the Group allows its customers to make payments in instalments over a period of 2 to 5 years. In order to mitigate the credit risk, the Group receives advances from its customers at the time of the sale and post-dated cheques for the remaining balance at the time of hand over. In addition, the Group does not transfer the legal title of the property to the customer until the full amount has been paid. Furthermore, the risk of financial loss to the Group on account of customer default is low as the property title acts as collateral.

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4 FINANCIAL RISK MANAGEMENT AND CAPITAL MANAGEMENT (CONTINUED) Credit risk (continued) Trade receivables and contract assets (contract assets) An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (i.e., product type, customer type and rating). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one year and are not subject to enforcement activity. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 29. The Group does not hold collateral as security. The Group evaluates the concentration of risk with respect to trade receivables and contract assets as low, as the balances are due from a large number of customers operating in various industries. Exposure to credit risk from trade receivables is discussed in details in Note 29.

Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. The Group considers the credit risk on bank balances to be minimal given that the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Group invests only on quoted equity and debt securities with low credit risk. The Group’s maximum exposure to credit risk for the components of the statement of financial position at 31 December 2018 and 2017 is the carrying amounts as illustrated in Note 29.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk relates to trade and other payables (including non-current payables), security deposits, amounts due to related parties, short-term bank borrowings, and long-term bank loans. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The maturity profile of the Group’s financial liabilities is disclosed in Note 29.

Market risk

Market risk is the risk resulting from changes in market prices, such as interest rates and equity prices, which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

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4 FINANCIAL RISK MANAGEMENT AND CAPITAL MANAGEMENT (CONTINUED)

Market risk (continued) Equity risk

The Group buys and sells certain marketable securities. The Group’s management monitor the mix of securities in the investment portfolio based on market expectations and these dealings in marketable securities are approved by the Board of Directors.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s debt obligations with floating interest rates. Interest rate sensitivity analysis is disclosed in Note 29. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s financing activities in relation to debt obligations denominated in Egyptian Pounds.

Foreign currency risk sensitivity analysis is disclosed in Note 29.

Capital management

The Board of Director’s policy is to maintain a strong capital base so as to maintain creditors, customers and market confidence and to sustain future development of the business. The Board of Directors’ would monitor the return on capital and level of dividends based upon profits earned by the Group during the year.

There were no changes in the Group’s approach to capital management during the year. Except for complying with certain provisions of the UAE Federal Law No. (2) of 2015, the Company is not subject to any externally imposed capital requirements.

42


Notes to the consolidated financial statements (continued) 5 REVENUE AND DIRECT COSTS

5.1 Disaggregated revenue and cost information

Segments Real estate Contracting

Goods and

services Total

AED’000 AED’000 AED’000 AED’000

Type of goods or service

Property rentals 63,975 - - 63,975

Sale of properties 66,878 - - 66,878

Mechanical, electricidal and plumbing - 25,009 - 25,009

Facility management and maintenance services - - 226,610 226,610

Interior architecture - 50,399 - 50,399

Motor racing services - - 36,468 36,468

Sale of goods - - 31,649 31,649

Total revenue from contracts with customers 130,853 75,408 294,727 500,988

Timing of revenue recognition

Assets and goods transferred at a point in time 66,878 - 31,649 98,527

Services transferred over time 63,975 25,009 263,078 352,062

Goods and services (bundled) transferred over time - 50,399 - 50,399


Direct costs (96,654) (58,885) (226,524) (382,063)

Gross profit 34,199 16,523 68,203 118,925

For the year ended 31 December 2018

Segments Real estate Contracting

Goods and

services Total

AED’000 AED’000 AED’000 AED’000

Type of goods or service

Property rentals 72,922 - - 72,922

Sale of properties 43,540 - - 43,540

Mechanical, electricidal and plumbing - 45,896 - 45,896

Facility management and maintenance services - - 205,066 205,066

Interior architecture - 60,038 - 60,038

Motor racing services - - 35,390 35,390

Sale of goods - - 21,755 21,755


Timing of revenue recognition

Assets and goods transferred at a point in time 43,540 - 21,755 65,295

Services transferred over time 72,922 45,896 240,456 359,274

Goods and services (bundled) transferred over time - 60,038 - 60,038


Direct costs (81,667) (427,686) (206,865) (716,218)

Gross profit 34,795 (321,752) 55,346 (231,611)

For the year ended 31 December 2017

43



5 REVENUE AND DIRECT COSTS (CONTINUED) 5.2 Direct costs information

Direct costs include the following:

2018 2017

AED’000 AED’000

Staff costs 142,075 144,546

Development properties recognised as cost 53,044 31,216

Inventories recognised as cost 13,496 9,608

Depreciation (note 8) 4,533 6,069

Provision against the contracting business - 268,330

Provision against the contracting business

During the year ended 31 December 2017, the Company’s Board of Directors resolved to down size the operations of Thermo LLC, a subsidiary of the Company, to a closure level. The Board of Directors, with the assistance of independent lawyers, reviewed and assessed the risk associated with the historical claims arising against the subsidiary. Accordingly, in 2017, the Group recorded provision of AED 119 million against contract assets and certain trade and retention receivables. In addition, based on management’s assessment of future claims and the fact that performance bond guarantees granted by the subsidiary against projects are not expected to be retrieved, a provision of AED 149 million was recorded to account for the risk and obligation that may arise against future claims towards such claims and guarantees.

5.3 Contract balances

2018 2017

AED’000 AED’000

Trade and retention receivables (note 10 & 14) 298,543 720,341

Contract assets (note 13) 197,835 207,671

Contract liabilities (note 18) 96,138 139,492

Trade receivables Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days from the date of sale. In 2018, AED 13.3 million was recognised as provision for expected credit losses on trade receivables (2017: AED 0.6 million). Retentions receivable Retentions receivable are non-interest bearing and represent payments withheld by customers over a certain period and according to contractual agreements between the Group and the customers. These retentions are calculated based on a certain percentage of the total work billed. Retentions receivable serve as guarantees to customers for the proper execution of the contract during and after completion of the projects. In 2018 no provision for expected credit losses on retentions receivable was recognised (2017: Nil).

44


Notes to the consolidated financial statements (continued) 5 REVENUE AND DIRECT COSTS (CONTINUED)

5.3 Contract balances (continued) Contract assets Contract assets are initially recognised for revenue earned from contracting activities as receipt of consideration is conditional on acceptance of the customer. Upon acceptance by the customer, the amounts recognised as contract assets are reclassified to trade receivables. In 2018, no provision for expected credit losses on contract assets was recognised (2017: Nil). Contract liabilities Contract liabilities represent advances received from customers to deliver projects, goods, and services, advances for rental of properties and excess billings (note 18).

5.4 Performance obligations

Information about the Group’s performance obligations are summarised below: Sales of goods The performance obligation is satisfied upon collection/delivery of the goods and payment is generally due within 30 to 90 days from the date of sale. The Group receives short-term advances against the satisfaction of the related performance obligations, which do not contain any financing component, and provides assurance type warranty, which is not considered a separate performance obligation. Contracting The performance obligation for mechanical, electrical and plumbing works and interior decorations are satisfied over time, because the customer simultaneously receives and consumes the benefits provided by the Group. Payment is generally due upon submission of payment certificates and acceptance of the same by customers. The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 December are, as follows:

2018 2017

AED’000 AED’000

Within one year 16,194 25,213

Sale of properties Based on the terms of the current sales contracts in issue, the performance obligation for the sale of properties is satisfied at a point in time, when the Company completes the physical handing over of the sold property. Payment is generally due upon handing over the property and is some cases is deferred in the form of instalments. Rental income from properties The performance obligation for the rental of properties is satisfied over time, because the customer simultaneously receives and consumes the benefits provided by the Group. The Group usually receives payment against rental contract in advance.

45


Notes to the consolidated financial statements (continued) 5 REVENUE AND DIRECT COSTS (CONTINUED)

5.4 Performance obligations (continued) Services The performance obligations for facility management, maintenance and motor racing services are satisfied over time, because the customer simultaneously receives and consumes the benefits provided by the Group. 6 ADMINISTRATIVE AND GENERAL EXPENSES

2018 2017

AED’000 AED’000

These include the following:

Staff costs 83,109 60,838

Professional fees and licenses 61,775 36,031

Depreciation (note 8) 8,395 10,878

Marketing and advertising expenses 11,508 12,326

Expected credit loss expense on receivables (note 29) 13,264 599

Office expenses 11,201 6,628

7 OTHER INCOME

2018 2017

AED’000 AED’000

Reversals of liabilities (refer note below) 90,138 124,000

Gain on disposal of property, plant and equipment (note 8) - 589

Miscellaneous income 29,562 17,968

119,700 142,557

The reversals of liabilities are mainly related to payables and accruals in relation to completed projects, for which management assessed that no settlement will be required against.

46


Notes to the consolidated financial statements (continued) 8 PROPERTY, PLANT AND EQUIPMENT

Land

Buildings and

leasehold

improvements

Plant and

machinery

Furniture,

fixtures and

office

equipments

Motor

vehicles

Equipment

and tools

Capital work-

in-progress Total

AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Cost and revaluation: -

At 1 January 2017 39,288 143,260 32,582 91,662 57,640 13,208 823 378,463

Additions - 2,282 4,087 2,926 3,232 186 6,611 19,324

Disposal - (9,223) - (15,834) (3,100) (52) - (28,209)

At 31 December 2017 39,288 136,319 36,669 78,754 57,772 13,342 7,434 369,578

Additions - 54 362 4,246 2,463 650 8,215 15,990

Revaluation (note 8.2) 390,011 - - - - - - 390,011

Disposals - - (1,543) (4,608) (377) (1,061) - (7,589)

Transfers - (1,204) - 3,185 - - (3,185) (1,204)

At 31 December 2018 429,299 135,169 35,488 81,577 59,858 12,931 12,464 766,786

Depreciation:

At 1 January 2017 - 56,351 29,962 86,162 48,608 11,602 - 232,685

Charge for the year (note 8.3) - 5,611 5,169 3,379 1,835 953 - 16,947

Disposals - (8,939) - (11,070) (3,030) (50) - (23,089)

At 31 December 2017 - 53,023 35,131 78,471 47,413 12,505 - 226,543

Charge for the year - 5,905 795 3,337 2,221 670 - 12,928

Disposals - - (1,544) (2,807) (376) (971) - (5,698)

Transfers - (311) - - - - - (311)

At 31 December 2018 - 58,617 34,382 79,001 49,258 12,204 - 233,462

Net carrying amount:

At 31 December 2018 429,299 76,552 1,106 2,576 10,600 727 12,464 533,324

At 31 December 2017 39,288 83,296 1,538 283 10,359 837 7,434 143,035

47


Notes to the consolidated financial statements (continued) 8 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 8.1 Capital work-in-progress Capital work in progress mainly represents payments towards office renovation and equipment. 8.2 Revaluation of land The Group changed the accounting policy with respect to the measurement of land in on a prospective basis in 2018. Therefore, the fair value of the land was not measured at 1 January and 31 December 2017. If land was continued to be measured using the cost model, the carrying amount would be AED 39.3 million. The fair value of the land was determined using a valuation methodology based on a discounted cash flow model, as there is a lack of comparable market data due to the nature of the property. The valuation at 31 December 2018 was carried by independent valuers with specific valuation experience for similar properties based on assumptions prepared by management and validated by the external valuer. Significant unobservable inputs have been used in estimating the fair value of the property including cash flow projections, future capital expenditures, discount rate and growth rate. A net gain from the revaluation of the land of AED 390 million in 2018 was recognised in OCI, representing a level 3 revaluation gain. Significant increases (decreases) in the significant unobservable inputs would result in a significantly higher (lower) fair value. 8.3 Depreciation Depreciation is allocated in profit or loss as follows:

2018 2017

AED’000 AED’000

Depreciation recoginzed as cost 4,533 6,069

Depreciation recognised as general and administrative expenses 8,395 10,878

12,928 16,947

48


Notes to the consolidated financial statements (continued) 9 INVESTMENT PROPERTIES

The Group’s investment properties consist of commercial and residential properties as well as land in Dubai Motor City, which are carried at fair value based on level 3 fair value hierarchy. The Group has no restrictions on the realizability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

The movement in investment properties during the year was as follows:

2018 2017

AED’000 AED’000

At 1 January 3,718,645 5,595,437

Additions during the year 32,500 198,906

Transfer to development properties (note 12) (46,637) -

Transfer from development properties (note 12) 7,170 -

Transfer from property, plant and equipment (note 8) 893 -

Transfer from receivables (note 9.1) 412,137 -

Gain/(loss) on fair valuation (note 9.5) 86,404 (2,075,698) At 31 December 4,211,112 3,718,645

9.1 Transfer from receivables

During the year, amounts of AED 233.7 million and AED 178.5 million were transferred from current and non-current receivables, respectively, pertaining to receivables from the sale of a property, whereby the buyer defaulted on the payments and the Company exercised its contractual legal right to claim back the property. Accordingly, these amounts were reclassified to investment properties based on management’s decision to hold the property for rental and/or capital appreciation purposes, which resulted in a change in fair value of AED 112.9 million recorded in profit or loss during the year ended 31 December 2018. 9.2 Transfer from development properties

The Board of Directors of the Company has reassessed the use of certain properties held for sale under development properties. Accordingly, properties amounting to AED 7.2 million have been transferred from development properties to investment properties. As at the reporting date, these properties have been stated at fair value in accordance with the accounting policy adopted by the Group for the measurement of investment properties.

9.3 Transfer to development properties

During the year, the Group transferred properties amounting to AED 46.6 million from investment properties to development properties upon change in use (2017:nil). These properties were sold during the year.

9.4 Transfer from property, plant and equipment

During the year, the Group transferred properties amounting to AED 0.9 million from property, plant and equipment to investment properties upon change in use (2017:nil).

49



9 INVESTMENT PROPERTIES (CONTINUED) 9.5 Valuation of investment properties

As at 31 December 2018 and 2017, the fair values of the properties are based on valuations performed by Valustrat Consulting FZCO, an accredited independent registered valuer. A valuation model in accordance with that recommended by the International Valuation Standards Council has been applied. The independent valuer provides the fair value of the Group’s investment property portfolio every six months. The independent registered valuer carried out the valuation based on an open market valuation in accordance with RICS Appraisal and Valuation Manual issued by the Royal Institute of Chartered Surveyors, adopting the IFRS basis of fair value and using established valuation techniques. The independent valuer reviewed the updated master community development plan for the MotorCity project in forming its view of the fair value of the portfolio as at 31 December 2018 and 2017. The fair values have been determined by taking into consideration the discounted cash flows where the Company has ongoing lease arrangements. In this regard, the Group’s current lease arrangements, which are entered into on an arm’s length basis, and which are comparable to those for similar properties in the same location, have been taken into account. In cases where the Company does not have any on-going lease arrangements, fair values have been determined, where relevant, having regard to recent market transactions for similar properties as well as taking into account of expected changes in the supply of properties in and around the same location as the Group’s investment properties. These values are adjusted for differences in key attributes such as property size. For property under construction, the valuation was determined using residual value approach incorporating a combination of both the income and cost approaches. The market value estimate of these properties is on the assumption that the properties are complete as at the date of valuation, and from which appropriate deductions are made for the costs to complete the project in order to estimate the value of the property in its present condition.

Considering the expected significant increase in the new supply of plots of land in and around the land bank of the Company together with the already existing undeveloped plots of land in existing communities, the independent valuer and management believe this is resulting in increased competition and downward pricing pressures particularly for plots of land. Furthermore, increased property developments in and around the land bank of the Company that are being completed for delivery in the end user property market, have resulted into more competition and reduced prices for developed properties as well as land prices. As a result, development margin risks are believed to be increasing when purchasing land as compared to 2017. These factors have resulted in a lower fair value of the Group’s land bank. As at 31 December 2018, the independent valuer has determined AED 4,211 million (2017: 3,719 million) as the fair value of the Group’s investment properties. Accordingly, based on the above valuation, fair value gains of AED 86.4 million (2017: valuation loss of AED 2,076 million) has been recognised in the consolidated statement of profit or loss for the year ended 31 December 2018. The fair value loss of AED 2,076 million in 2017 includes AED 690 million of valuation loss on gross floor area (see details in note 9.6) and AED 1,380 million as change in fair value of investment properties.

50



9 INVESTMENT PROPERTIES (CONTINUED) 9.5 Valuation of investment properties (continued)

The Company’s Board of Directors has reviewed the assumptions and methodology used by the independent registered valuer, and in its opinion, these assumptions and valuation methodology are appropriate and prudent as at the reporting date.

Any significant movement in the assumptions used for the fair valuation of investment properties would result in significantly lower/higher fair values of those assets.

9.6 Valuation loss on gross floor area

As at 1 January 2017, the Company had ownership of 14.33 million square feet of gross floor area for development within the MotorCity project. With an expected significant increase in new supply of plots of land in and around the land bank of the Company, during the year ended 31 December 2017, the Company had appointed an independent third party consultant to review and prepare an updated master community development plan for the MotorCity project. Considering the infrastructure and the master community development plan as approved by Dubai Municipality, the independent third party consultant had advised that the Company will likely only be able to utilise 12 million square feet of gross floor area distributed among residential, retail and commercial on the existing unsold and undeveloped plots of land within the MotorCity project. The independent third party consultant had recommended that in case the Company would like to utilise the extra 2.33 million square feet of gross floor area, the Company would need to consider additional commercial costs as well as the practicality of obtaining the required regulatory approvals in the UAE for developing this extra gross floor area.

As at 31 December 2018, the independent third party consultant and management continue to believe that the Company will likely be able to utilise only 12 million square feet of gross floor area distributed among residential, retail and commercial on the existing unsold and undeveloped plots of land within the MotorCity project.

The Company’s Board of Directors continues to review the application of highest and best use of its available gross floor area to be applied on the Company’s plots of land in the future without forfeiture. The Company’s Board of Directors is of the opinion, taking into account the market factors noted above, that the updated master community development plan for the MotorCity project is most likely to yield the highest value and this plan has been approved by the Board of Directors for submission to the regulatory authorities for review and approval. Accordingly, the Company’s Board of Directors has confirmed that the 2.33 million of extra gross floor area should have a nil value as at 31 December 2018 and 2017 whereby the corresponding fair valuation loss amounting to AED 690 million has been recorded in the consolidated statement of profit or loss during the year ended 31 December 2017.

The Company’s intention is to develop its land bank, and while doing so, it may require and utilise this extra gross floor area depending on the commercial aspect and practicality of utilizing this extra gross floor area. Furthermore, as at 31 December 2018, the Company is still preparing the documentation for submitting the updated master community development plan for the MotorCity project to Regulatory Authorities for approval. Should these estimates or assumptions change, the actual results may defer.

9.7 Capitalised borrowing costs

The construction of a residential property development, which was completed during the year, was financed by a banking facility and the amount of borrowing costs capitalised during the year was AED 5.8 million up to the date of completion of construction (2017: AED 6.4 million).

51


Notes to the consolidated financial statements (continued) 9 INVESTMENT PROPERTIES (CONTINUED)

9.8 Description of valuation techniques used and key inputs to valuation of investment properties

The valuations were determined mainly using the income valuation approach or the market (sale comparable) valuation approach based on significant unobservable inputs such that the fair value measurement was classified as level 3. Income valuation approach In determining the fair value of properties using the income valuation approach, the valuer took into account property specific information such as the current contracted tenancies agreement and forecasted operating expenses. The valuer applied assumptions for capitalization yield rates and estimated market rent, which are influenced by specific characteristics, such as property location, income return and occupancy of each property in the portfolio, to arrive at the final valuation. The significant unobservable inputs include: estimated rental value per square foot., forecasted operating expenses, long-term vacancy rate and discount rate. For properties that are under development, the valuer used a residual approach, which takes into account the expectations of perceived market participants of the Gross Development Value for an asset assuming development is complete, less Gross Development Cost (which is the expected cost to complete development) in order to arrive at the property value in its current incomplete state. In this type of approach, additional unobservable inputs are used including comparable rent rates, expected future use of the asset, and expected time and cost to complete development. Market valuation approach In determining the fair value of properties using the market valuation approach, the valuer took into consideration the price per square foot for recent market transactions for comparable properties in and around the same location of the respective property and/or having the same quality and characteristics of the valued property. The significant unobservable input for this type of valuation mainly represents the price per square foot applied on the property area in determining the value of the respective property. Other information

Significant increases (decreases) in the significant unobservable inputs would result in a significantly higher (lower) fair values. The valuation basis and assumptions used for the valuation of investment properties are consistent with those adopted in 2017.

There were no changes to the valuation techniques during the year.

52


Notes to the consolidated financial statements (continued) 10 NON-CURRENT RECEIVABLES

2018 2017

AED’000 AED’000

Retention receivables 24,679 35,497

Property sales receivables 35,500 263,608

Other receivables - 154

60,179 299,259

The Group’s exposure to credit risk and impairment losses related to financial assets are disclosed in note 29.

11 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Investments at fair value through profit or loss comprise the following:

2018 2017

AED’000 AED’000

Quoted funds 286,230 -

Quoted equities 10,566 91,902

Unquoted equity 1,348 1,348

298,144 93,250

The movement in investments at fair value through profit or loss during the year was as follows:

2018 2017

AED’000 AED’000

At 1 January 93,250 173,399

Additions 940,233 111,878

Disposals (359,422) (190,408)

Transfer to investment in associate (note 24) (374,130) -

Loss on revaluation (1,787) (1,619) At 31 December 298,144 93,250

53


Notes to the consolidated financial statements (continued) 11 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)

The following table shows reconciliation from the opening balances to the closing balances for level 1 of fair values.

Level 1:

2018 2017

AED’000 AED’000

At 1 January 91,902 170,908

Additions 940,233 111,878

Disposals (359,422) (190,408)

Transfer to investment in associate (374,130) -

Total (loss)/gain - net:

-in the consolidated statement of profit or loss (1,787) (476) At 31 December 296,796 91,902

Investments in quoted funds

During the year, the Group invested in funds, having a fair value of AED 286 million as at the reporting date, which resulted in a net loss on change in fair value of AED 23.2 million during the year (2017: AED 1.2 million).

The Group also has an investment in a real estate fund valued at AED 1.35 million at year-end (2017: AED 2.5 million).

Investments in quoted equities

Palm Hills Development PJSC

During the six month period ended 30 June 2018, in line with its investment strategy, the Group made additional purchases of shares in Palm Hills Development PJSC, a company based in Egypt and listed on the Egyptian Stock Market and London Stock Exchange, increasing its ownership of shares as at the reporting date to 406.2 million shares (2017: 112.8 million shares), representing a 17.59% shareholding in the company (2017: 4.9% shareholding). The fair value of this investment as at 30 June 2018 was AED 374.9 million which resulted in a gain on change in fair value of AED 28.9 million during that period (31 December 2017: nil).

During the third quarter 2018, the investment was reclassified as an investment in associate upon obtaining the ability to exercise the necessary voting power on the investee's Board (Note 24). Accordingly, the investment with fair value of AED 374.1 million at 30 June 2018 (2017: AED 90.7 million) was transferred to investment in associate representing the cost of acquisition of the associate.

Other equity instruments

During the year, the Group invested in other listed equity investments, having a fair value of AED 10.6 million at the reporting date.

Others

The Group has no investments in Abraaj Group, any of its projects, funds or any business relationship with or exposure to it.

54


Notes to the consolidated financial statements (continued) 12 INVENTORIES

Trading and project related inventories

2018 2017

AED’000 AED’000

Project related material

(net of provision for slow moving materials) 1,790 235

Stock-in-trade 3,879 5,143

Spares and consumables 902 981

6,571 6,359

Development properties

2018 2017

AED’000 AED’000

At 1 January 8,868 40,084

Additions during the year 2,792 -

Transfer from investment properties (refer note 9) 46,637 -

Cost of properties sold (note 5.2) (53,044) (31,216)

Reversal of provision 9,421 -

Transfer to investment properties (refer note 9) (7,170) - At 31 December 7,504 8,868

Development properties at 31 December 2018 are stated net of provision of AED 1.6 million (2017: AED 11 million). During the year an amount of AED 9.4 million was reversed from the provision balance in profit or loss.

13 CONTRACT ASSETS

2018 2017

AED’000 AED’000

Costs plus attributable profit less foreseeable losses 370,176 386,459

Less: progress billings (177,567) (183,439)

192,609 203,020

Disclosed in the consolidated statement of

financial position:

Contract work-in-progress (note 5.3) 197,835 207,671

Excess billings over project WIP (note 18) (5,226) (4,651)

192,609 203,020

55


Notes to the consolidated financial statements (continued) 14 TRADE AND OTHER RECEIVABLES

2018 2017

AED’000 AED’000

Financial instruments

Trade receivables 1,969,528 1,947,953

Retention receivables 54,179 58,249

Property sales receivables 20,032 207,244

2,043,739 2,213,446

Less: provision for allowance for expexted credit losses (1,805,375) (1,792,210)

238,364 421,236

Other receivables 47,048 24,025

Total (A) 285,412 445,261

Non-financial instruments

Advances to contractors 28,429 11,275

Prepayments and advances 25,292 27,152

Total (B) 53,721 38,427

Total (A+B) 339,133 483,688

The Group’s exposure to credit risk and impairment losses related to receivables are disclosed in note 29.

15 TRANSACTIONS WITH RELATED PARTIES

The Group, in the normal course of business, enters into transactions with other enterprises, and individuals which fall within the definition of a related party contained in International Accounting Standard No. 24. Such transactions are on terms and conditions approved by the Group’s management. Balances with related parties in the consolidated statement of financial position represent balances due from equity accounted investees. The Group’s exposure to credit risk and liquidity risk related to related party balances are disclosed in note 29.

Compensation to directors and other members of key management are as follows:

2018 2017

AED’000 AED’000

Salaries and other short term employee benefits 18,778 15,882

Provision towards employees terminal benefits 716 728

56


Notes to the consolidated financial statements (continued) 16 CASH IN HAND AND AT BANKS

2018 2017

AED’000 AED’000

Cash in hand 658 556

Cash at banks

– in deposit accounts held under lien 42,646 11,063

– in current accounts 37,053 90,460

– in other deposit accounts 17,141 27,578

97,498 129,657

(a) Cash and cash equivalents

2018 2017

AED’000 AED’000

Cash and cash equivalents comprise:

Cash in hand and at banks (excluding deposits under lien) 54,852 118,594

Bank overdrafts (refer note 19) (231,426) (51,106)

(176,574) 67,488

(b) Cash at banks in deposit accounts

Cash at banks in deposit accounts carry interest at commercial rates.

The Group’s exposure to interest rate risk and sensitivity analysis of financial assets are disclosed in note 29.

17 TRADE AND OTHER PAYABLES

2018 2017

AED’000 AED’000

Financial instruments

Trade payables 360,533 383,363

Retention payables 61,646 61,782

Other payables and accruals (refer (a) below) 832,783 773,711

Total 1,254,962 1,218,856

Other payable and accruals include:

2018 2017

AED’000 AED’000

Provisions and accruals against contracting business 536,997 572,899

Provision for staff related payables 29,857 50,399

Provisions for payment to contractors cost 10,071 10,071

The group’s exposure to liquidity risk related to trade and other payables is disclosed in note 29.

57


Notes to the consolidated financial statements (continued) 18 CONTRACT LIABILITIES

2018 2017

AED’000 AED’000

Advances from customers - current 82,960 100,578

Advances from customers - non-current 7,952 34,263

Excess billings over project WIP 5,226 4,651

96,138 139,492

Non-current contract liabilities represent advances received from customers against the sale of properties in accordance with the payment schedules as stated in the respective sale and purchase agreements, whereby the revenue would be recognised upon the handover of the properties.

19 BANK OVERDRAFTS

2018 2017

AED’000 AED’000

Bank overdrafts 231,426 51,106

Significant terms and conditions

Bank overdrafts have been obtained from local and foreign banks to finance the working capital requirements of the Group, which carry interest at commercial rates. Securities

Bank overdrafts are secured by:

• Promissory notes;

• Joint and several guarantees of the Company;

• A letter of undertaking by the Company not to reduce its shareholding in Thermo LLC (“a subsidiary”) as long as the banking facilities are outstanding; and

• Assignment of certain contract and retention receivables. For more information about the Group’s exposure to liquidity risk and interest rate risk, refer note 29.

58


Notes to the consolidated financial statements (continued) 20 BANK LOANS

This note provides information about the contractual terms of the Group’s interest bearing bank loans, which are measured at amortised cost. For more information about the Group’s exposure to liquidity risk and interest rate risk, refer note 29.

2018 2017

AED’000 AED’000

At 31 December 1,544,913 1,510,676

Less: Current portion (981,995) (591,565)

Non-current portion 562,918 919,111

The bank loans carry interest at commercial rates. Further details related to bank loans are shown below.

The movement in bank loans during the year was as follows:

2018 2017

AED’000 AED’000

At 1 January 1,510,676 1,364,098

Availed during the year 485,110 241,892

Repayments during the year (450,873) (95,314)

At 31 December 1,544,913 1,510,676

Bank loans mainly include the following facilities:

(i) In 2014, the Company obtained an Islamic financing facility in the amount of AED 360 million from a local Islamic bank to settle another bank facility of the same amount. This facility is repayable in 25 equal quarterly instalments, which commenced in April 2016, and a final instalment of AED 140 million due in July 2021.

During 2016, the Group has made an early settlement amounting to AED 40 million against this bank loan. During 2018, the loan was fully settled through a new bank facility (refer vii below) At 31 December 2017, the loan amount outstanding was AED 243.9 million.

(ii) In 2012, the Group entered into an agreement with a local bank, to obtain a term loan of AED 1,078.2 million which was utilised by the Group to settle outstanding short-term bank borrowings that existed at that date. This term loan is repayable in 6 equal annual instalments of AED 100 million commencing on 30 June 2016 and a final payment of AED 478.2 million payable on 30 June 2022, in addition to semi-annual interest payments.

During 2016, the Group made a settlement of AED 100 million against the first instalment and an early settlement of AED 500 million against the remaining annual instalments. At 31 December 2018, the loan amount outstanding is AED 478.2 million (2017: AED 478.2 million). At 31 December 2018, the loan has been classified as a current liability due to breach in contractual payment.

59



20 BANK LOANS (CONTINUED)

(iii) In 2016, the Company obtained a long-term bank loan from a local bank of AED 19.5 million. The loan is repayable in twelve quarterly instalments of AED 1.6 million that commenced in May 2016 plus interest. At 31 December 2018, the loan amount outstanding is AED 3.2 million (2017: AED 8.1 million).

(iv) During 2016, the Group entered into agreement with a local bank to obtain a long-term bank loan amounting to AED 550 million to partially settle another bank loan (refer ii above). The loan is repayable in 36 quarterly equal instalments that commenced in September 2016 and carries commercial interest rate. At 31 December 2018, the loan amount outstanding is AED 412.5 million (2017: AED 458.3 million).

As at 31 December 2017, the Company had not complied with one of the bank covenants, and accordingly, the loan was classified as current liability in the consolidated statement of financial position. At 31 December 2018, the loan continues to be classified as a current liability due to breach in contractual payment.

(v) During 2016, the Company entered into an agreement with two local banks and obtained a long-term bank loan with a limit of AED 290 million for the construction of “Oia”, a residential building in MotorCity. The loan is repayable in 12 quarterly equal instalments commencing in September 2019. At 31 December 2018, the withdrawn amount of the loan is AED 216 million (2017: AED 196 million).

(vi) During the previous year, the Company entered into an agreement with a bank to obtain a short-term

loan amounting to AED 125 million, which was settled in January 2018.

(vii) During the year, the Group entered into an agreement with a local bank to obtain a long-term loan amounting to AED 350 million, which was utilised to early settle another bank loan (refer i above). The new facility is repayable in 39 quarterly instalments on a reducing balance basis that commenced in September 2018 and a final instalment of AED 113.8 million due in March 2028. The loan has a balance of AED 336 million at year-end.

(viii) During the current year, the Group entered into an agreement with a local bank to obtain a long-term

loan amounting to AED 100 million. The loan is repayable in 24 quarterly equal instalments that commenced in April 2018. The loan has a balance of AED 87.5 million at year-end.

Securities

The above-mentioned bank loans are secured by one or more of the following:

a. Registered mortgage of lands and properties with a fair value of AED 2,411 million at 31 December 2018 (2017: AED 2,364 million);

b. Assignment of insurance policies of the mortgaged properties; c. Assignment of lease proceeds of certain rental units; and d. Corporate guarantees of the Company and certain subsidiaries; e. Assignment of receivables; and f. Assignment of escrow account of one of the projects

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21 PROVISION FOR STAFF TERMINAL BENEFITS

2018 2017

AED’000 AED’000

At 1 January 40,464 54,676

Provision made during the year 5,683 12,065

Payments made during the year (10,700) (26,277) At 31 December 35,447 40,464

The provision for staff terminal benefits, disclosed as a non-current liability, is calculated in accordance with the UAE Labour Law.

22 SHARE CAPITAL

2018 2017

AED’000 AED’000

Issued and fully paid up at 31 December

4,289,540,134 (2017: 4,289,540,134)shares of par value of AED 1 each 4,289,540 4,289,540

At 31 December 2018, the share capital comprised of ordinary equity shares. All issued shares are fully paid. The holders of ordinary equity shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the General Assembly of the Company. All shares rank equally with regard to the Company’s residual assets.

At 31 December 2018, the authorised share capital of the Company is 7 billion shares.

At the Annual General Assembly held on 26 April 2017, the shareholders approved issuing 8% bonus shares as dividends for the year ended 31 December 2016.

23 RESERVES

Statutory reserve

According to the UAE Federal Law No. (2) of 2015 and the Company’s Articles of Association, 10% of the annual profit of the Group is appropriated to statutory reserve until such reserve equals 50% of the paid-up share capital of the Company. Such allocations may be ceased when the statutory reserve equals half of the paid-up share capital of the Company. During the current year, the Company transferred an amount of AED 6.2 million to the statutory reserve (2017: nil).

General reserve

According to the Articles of Association of the Company, 10% of the annual profit of the Group is appropriated to general reserve. The transfer to general reserve may be suspended at the recommendation of the Board of Directors or when it equals 50% of the paid-up share capital.

61


Notes to the consolidated financial statements (continued) 23 RESERVES (CONTINUED) General reserve (continued)

During the previous year, in accordance with the Articles of Association of the Company, the Board of Directors resolved to apply the general reserve amounting to AED 313.7 million to partially offset the Group’s accumulated losses as at 31 December 2017.

Asset revaluation surplus

Changes in the fair value of the Group’s land under property, plant and equipment measured at fair value are recognised in OCI and credited to the asset revaluation surplus in equity.

24 INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE

Investment in a joint venture

The Group had a 50% interest in Emirates District Cooling (Emicool) LLC, a joint venture involved in providing cooling services. On 18 January 2018, the Group disposed its 50% interest in Emirates District Cooling (Emicool) LLC to Dubai Investments PJSC for a total consideration of AED 500 million, resulting in a gain on disposal amounting to AED 125 million recognised in profit or loss.

The Group’s interest in the joint venture is accounted for using the equity method in the consolidated financial statements.

Summarised financial information of the joint venture, based on its IFRS financial statements, and reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below:

2017

AED’000

Financial position:

Non-current assets 1,730,644

Current assets 250,347

Non-current liabilities (972,880)

Current liabilities (258,140)

Equity 749,971

Group's share of equity - 50% 374,986

Income 379,391

Expenses (299,363)

Profit for the year 80,028

Group's share of profit - 50% 40,014

62


Notes to the consolidated financial statements (continued) Investments in associates

Investment in Palm Hills Development

In line with the Group’s investment strategy, the Group through its investment arm made a strategic investment in Palm Hills Development in 2017 and 2018, involved in investment in and development of properties and property related activities in Egypt and listed on the Egyptian Stock Market.

During the year, the Group reassessed its level of influence over Palm Hills Development in light of acceptance from the investee's Board of the Group’s the right to appoint two Directors to the Board of Palm Hills Development. The Group has determined that this right to appoint two directors gives it significant influence over Palm Hills Development. The appointment of the members was completed during the fourth quarter of 2018.

Accordingly, the Group reclassified its investment from an investment at fair value through profit or loss, to an investment in associate to be accounted for under the equity method in accordance with IAS 28 effective 1 July 2018.

Upon reclassification, the previously reported fair value of the investment at 30 June 2018 of AED 374.1 million became the cost of the investment in associate (Note 11) with a shareholding of 17.59%. The difference between the Group's share of the net assets and the fair value of the consideration of AED 128 million at the date of acquisition has been provisionally accounted for as embedded goodwill.

During the fourth quarter 2018, the Group disposed of 22.3 million shares in the associate resulting in a loss of AED 11.1 million recognised as part of the share of profit of equity accounted investees in the consolidated statement of profit or loss. In addition, Palm Hills Development PJSC issued 769.65 million new shares to the public, to which the Group did not subscribe. As a result of those transactions, the Group’s shareholding in the associate decreased to 12.47% at 31 December 2018. The Group continues to exercise significant influence over the investee through its board representation as mentioned above.

As a result of the disposal of 22.3 million shares, the amount of the embedded goodwill decrease to AED 121 million at 31 December 2018. The purchase price allocation exercise is not yet complete at the date of the issuance of these consolidated financial statements.

The investment is accounted for using the equity method in the consolidated financial statements from the date when the investment was classified as an investment in associate.

The following table illustrates the summarised financial information of the Group’s investment in the associate as at and for the three month period ended 30 September 2018, whereby financial information related to the fourth quarter 2018 were not made available to the Group at the date of the issuance of the consolidated financial statements:

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Notes to the consolidated financial statements (continued) 24 INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE (CONTINUED)

Investments in associates (continued)

Investment in Palm Hills Development (continued)

2018

AED’000

Financial position:

Non-current assets 3,244,585

Current assets 3,540,997

Non-current liabilities (1,516,341)

Current liabilities (3,722,384)

Non-controlling interests (107,744)

Equity at 30 September 1,439,113

Group's share of equity - 17.59% - at 30 September 253,140

Embedded goodwill at acquisition 128,235

Carrying amount at 30 September 381,375

Disposal of shares during 4th quarter 2018 (20,557) Carrying amount at 31 December 360,818

Income for the 3 months period ended 30 September 2018 469,268

Expenses for the 3 months period ended 30 September 2018 (420,811)

Less: profit attributable to non-controlling interests (7,273) Profit for the period 41,184

Group's share of profit - 17.59% 7,244

Investment in Properties Investment LLC The Group has 30% equity interest in Properties Investment LLC, involved in property investments. Properties Investment LLC is a private entity that is not listed on any public exchange. The Group’s interest in Properties Investment LLC is accounted for using the equity method in the consolidated financial statements. The following table illustrates the summarised financial information of the Group’s investment in Properties Investment LLC:

64


Notes to the consolidated financial statements (continued) 24 INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE (CONTINUED) Investments in associates (continued)

2018 2017

AED’000 AED’000

Financial position:

Non-current assets 263,970 232,174

Current assets 746,165 700,811

Non-current liabilities (350,022) (369,465)

Current liabilities (196,984) (167,618)

Equity 463,129 395,902

Group's share of equity - 30% 138,939 118,771

Income 114,183 60,236

Expenses (46,955) (181,681)

Profit/(loss) for the year 67,228 (121,445)

Group's share of profit/(loss) - 30% 20,168 (36,434)

25 DIRECTORS’ FEES

This represents professional fees paid/payable to the Company’s directors for serving on any committee, for devoting special time and attention to the business or affairs of the Company and for performing services outside the scope of their ordinary activities.

26 BASIC AND DILUTED EARNINGS PER SHARE

2018 2017

Profit/(loss) attributable to shareholders (AED’000) 62,329 (2,375,220) Weighted average number of shares 4,289,540,134 4,289,540,134

Basic and diluted earnings per share (AED) 0.015 (0.554)

65


Notes to the consolidated financial statements (continued) 27 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

2018 2017

AED’000 AED’000

Company and its subsidiaries

Commitments:

Capital commitments 12,015 49,571

Contingent liabilities:

Letters of guarantee 309,960 398,791

An associate and a joint venture

Contingent liabilities:

Letters of guarantee 252,500 252,500

During 2016, a Corporate guarantee was issued by the Company in favour of Dubai Islamic Bank PJSC ("DIB") in respect of 50% of the amounts outstanding under the Murabaha facility agreement dated August 2016 between “Properties Investment LLC” and DIB (the "Murabaha Facility Agreement") for the full duration of the Murabaha Facility Agreement. Contingent liabilities There are certain claims and contingent liabilities that arise during the normal course of business. The Board of Directors review these on a regular basis as and when such complaints and/or claims are received and each case is treated according to its merit and the terms of the relevant contract. 28 SEGMENT REPORTING Business segments

The Group’s activities include four main business segments, namely, real estate property management, contracting activities, investing activities, and sales of goods and services. The details of segment revenue, segment result, segment assets and segment liabilities are as follows:

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Notes to the consolidated financial statements (continued) 28 SEGMENT REPORTING (CONTINUED)

Real estate Contracting

Goods and

services Investments Total

AED’000 AED’000 AED’000 AED’000 AED’000

2018

Segment revenue 130,853 75,408 294,727 - 500,988

Loss on financial instruments at FVTPL - - - (1,787) (1,787)

Share of profit of associates - - - 16,380 16,380

Gain on disposal of a joint venture - - - 125,014 125,014

Gain on valuation of properties 86,404 - - - 86,404

Finance income 3,777 198 127 - 4,102

Other income 94,166 11,919 10,636 2,979 119,700

315,200 87,525 305,490 142,586 850,801

Direct Cost (96,654) (58,885) (226,524) - (382,063)

Administrative and general expenses (186,619) (31,030) (43,491) (21,111) (282,251)

Finance expense (49,775) (39,058) (7,082) (28,243) (124,158) Loss for the year (17,848) (41,448) 28,393 93,232 62,329

Capital expenditure 48,588 477 2,217 - 51,282 Depreciation 6,621 772 5,535 - 12,928

Segment assets 4,930,119 319,074 221,861 299,523 5,770,577

Investment in associates - - - 499,757 499,757 Total assets 4,930,119 319,074 221,861 799,280 6,270,334

Segment liabilities 1,285,655 1,533,054 184,644 159,823 3,163,176

2017

Segment revenue 116,462 105,934 262,211 - 484,607

Loss on financial instruments at FVTPL - - - (1,619) (1,619)

Share in profit of an associate and joint venture - - - 3,580 3,580

Gain on valuation of properties (2,075,698) - - - (2,075,698)

Finance income 10,220 144 341 - 10,705

Other income 136,585 821 5,151 - 142,557

(1,812,431) 106,899 267,703 1,961 (1,435,868)

Direct Cost (81,667) (427,686) (206,865) - (716,218)

Administrative and general expenses (73,265) (51,497) (33,116) - (157,878)

Finance expense (38,535) (26,106) (15) (600) (65,256) Profit/(loss) for the year (2,005,898) (398,390) 27,707 1,361 (2,375,220)

Capital expenditure 207,401 9,978 851 - 218,230 Depreciation 5,713 1,326 9,908 - 16,947

Segment assets 4,521,229 351,170 157,354 91,902 5,121,655

Investment in an associate and joint venture - - - 493,757 493,757 Total assets 4,521,229 351,170 157,354 585,659 5,615,412

Segment liabilities 1,311,179 1,555,882 93,533 - 2,960,594

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Notes to the consolidated financial statements (continued) 29 FINANCIAL INSTRUMENTS

Financial assets of the Group include non-current receivables, investments at fair value through profit or loss, trade and other receivables, amounts due from related parties and cash in hand and at bank. Financial liabilities of the Group include trade and other payables, amounts due to related parties, short-term bank borrowings and long-term bank loans. Accounting policies of financial assets and financial liabilities are disclosed under note 3. The table below sets out the Group’s classification of each class of financial assets and financial liabilities and their fair values for the current and the comparative years:

At fair value

through profit At amorized Carrying

or loss cost amount Fair value

Notes AED’000 AED’000 AED’000 AED’000

31 December 2018

Financial assets

Non-current receivables 10 - 60,179 60,179 60,179

Investments at fair value through profit or loss 11 298,144 - 298,144 298,144

Trade and other receivables 14 - 285,412 285,412 285,412

Due from related parties 15 - 19,277 19,277 19,277

Cash in hand and at bank 16 - 97,498 97,498 97,498 Total 298,144 462,366 760,510 760,510

Financial liabilities

Trade and other payables 17 - 1,254,962 1,254,962 1,254,962

Bank overdrafts 19 - 231,426 231,426 231,426

Bank loans 20 - 1,544,913 1,544,913 1,544,913 Total - 3,031,301 3,031,301 3,031,301

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Notes to the consolidated financial statements (continued) 29 FINANCIAL INSTRUMENTS (CONTINUED)

At fair value

through profit At amorized Carrying

or loss cost amount Fair value

Notes AED’000 AED’000 AED’000 AED’000

31 December 2017

Financial assets

Non-current receivables 10 - 299,259 299,259 299,259

Investments at fair value through profit or loss 11 93,250 - 93,250 93,250

Trade and other receivables 14 - 445,261 421,236 421,236

Due from related parties 15 - 31,223 31,223 31,223

Cash in hand and at bank 16 - 129,657 129,657 129,657 Total 93,250 905,400 974,625 974,625


Trade and other payables 17 - 1,218,856 1,218,856 1,218,856

Bank overdrafts 19 - 51,106 51,106 51,106

Bank loans 20 - 1,510,676 1,510,676 1,510,676 Total - 2,780,638 2,780,638 2,780,638

69



Credit risk

Exposure to credit risk The carrying amount of financial assets represents the maximum credit risk exposure. The maximum exposure to credit risk at the reporting date was:

2018 2017


Non-current receivables (refer note below) 10 60,179 299,259

Investments at fair value through profit or loss 11 298,144 93,950

Trade and other receivables (refer note below) 14 285,412 445,261

Due from related parties 15 19,277 31,223

Cash at bank 16 96,840 129,101

759,852 998,794

Trade receivables at 31 December 2017 (including non-current receivables) include an amount of AED 412 million receivable from the sale of properties where the legal ownership of the property is retained by the Group as a collateral. At 31 December 2017, the fair value of the properties held as collateral by the Group approximates to AED 525 million.

Impairment losses Set out below is the information about the credit risk exposure on the Group’s trade and retention receivables using a provision matrix:

Retentions 1-90 91-365 >365

receivable Current days days days Total


31 December 2018

Expected credit loss rate 81.76% 3.59% 14.79% 7.75% 98.51%

Gross amount 78,858 116,784 39,583 121,248 1,747,445 2,103,918

Provision 64,478 4,191 5,856 9,397 1,721,453 1,805,375

31 December 2017

Expected credit loss rate 85.93% 0.00% 0.74% 2.83% 80.73%

Gross amount 93,746 80,809 57,655 69,227 2,117,368 2,418,805

Provision 80,554 - 425 1,960 1,709,271 1,792,210

Past due

Trade receivables

70



Credit risk (continued) Impairment losses (continued) The movement in the allowance for expected credit losses in respect of trade and retention receivables during the year is as follows:

2018 2017

AED’000 AED’000

At 1 January 1,792,210 1,791,976

Provision for the year (refer note 6) 13,264 599

Amounts written off/provision reversed during the year (99) (365)

At 31 December (refer note 14) 1,805,375 1,792,210

71



Liquidity risk

The following are the contractual maturities of financial liabilities, including interest payments and the impact of netting agreements at the reporting date:

Notes Carrying Contractual Less than More than

amount cash flows On demand one year 1 to 5 years five year



31 December 2018

Non-derivative financial

instruments

Trade and other payables 17 1,254,962 1,254,962 - 1,254,962 - -

Bank overdrafts 19 231,426 231,426 231,426 - - -

Bank loans 20 1,544,913 1,720,897 897,471 117,097 427,841 278,488 Total 3,031,301 3,207,285 1,128,897 1,372,059 427,841 278,488


31 December 2017

Non-derivative financial

instruments

Trade and other payables 19 1,218,856 1,208,611 - 1,208,611 - -

Bank overdrafts 21 51,106 51,106 51,106 - - -

Bank loans 22 1,510,676 1,822,979 458,333 192,389 1,172,257 - Total 2,780,638 3,082,696 509,439 1,401,000 1,172,257

72



Interest rate risk

The Group is exposed to interest rate risk on cash at bank, short-term bank borrowings and long-term bank loans (refer notes 16, 19 and 20) which carry variable interest rates.

At the reporting date, the interest rate profile of the Group’s variable interest bearing financial liabilities were as follows:

2018 2017

AED’000 AED’000

Bank overdrafts (refer note 21) 231,426 51,106

Bank loans (refer note 22) 1,544,913 1,510,676

1,776,339 1,561,782

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. The analysis below excludes interest capitalised and assumes that all other variables remain constant.

100 bp 100 bp

increase decrease

AED’000 AED’000

31 December 2018

Variable rate instruments (17,763) 17,763

31 December 2017

Variable rate instruments (15,618) 15,618

and equity

Effect on profit or loss

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

• Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Group has investments at fair value through profit or loss which are stated at fair value. Also refer to note 13.

Level 1 Level 3 Total

AED’000 AED’000 AED’000

31 December 2018

Investments at FVTPL 296,796 1,348 298,144

31 December 2017

Investments at FVTPL 91,902 1,348 93,250

There have been no reclassifications made between the valuation levels during the current year or the previous year.

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30 SIGNIFICANT ESTIMATES AND JUDGEMENTS

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The following are the critical accounting estimates and judgements used by management in the preparation of these consolidated financial statements:

Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements: Going concern assumption

The Group’s management has performed a detailed assessment of the Group’s ability to continue as a going concern, which covers a period of twelve months from the reporting date, based on certain identified events and conditions that, individually or collectively, may cast doubt on the Group’s ability to continue as going concern.

The Group’s management has prepared its business forecast and the cash flow forecast for the twelve months from the reporting date on a conservative basis. The forecasts have been prepared taking into consideration the nature and condition of its business, the degree to which it is affected by external factors and other financial and non-financial data available at the time of preparation of such forecasts.

On the basis of such forecasts, the Group’s management is of the opinion that the Group will be able to continue its operations for the next twelve months from the reporting date and that the going concern assumption used in the preparation of these consolidated financial statements is appropriate. The appropriateness of the going concern assumption is reassessed on each reporting date. Revenue from contracts with customers

The Group applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers: Determining the timing of satisfaction of sale of real estate properties

The Group is required to assess each of its contracts with customers for the sale of real estate properties to determine whether performance obligations are satisfied over time or at a point in time in order to determine the appropriate method of recognising revenue. The Group has assessed that based on the current sale and purchase agreements entered into with customers and the provisions of relevant laws and regulations, where contracts are entered into to provide real estate assets to customer, the Group does not create or enhance an asset that the customer controls as the asset is created or enhanced and the customer receives and consumes the benefits provided by the Group’s performance when the asset is transferred to the customer, and accordingly, revenue from such contracts is recognised at a point in time, when the property is handed over to the customer. The Group also assessed that, in those contracts, the transfer of the legal title of the property is not a criteria in determining the timing of satisfaction of the sale, given that such transfer is usually deferred until full payment from the customer is received, which is considered to be guarantee against receivables.

74



30 SIGNIFICANT ESTIMATES AND JUDGEMENTS (CONTINUED) Judgements (continued) Consideration of significant financing component in a contract The Group’s property sales include two alternative payment options for the customer, i.e., payment of the transaction price when the contract is signed and upon handing over of the property, or payment based on a deferred instalments plan. The Group concluded that there is a significant financing component for those contracts where the customer elects to pay in instalments considering the length of time between the customer’s payment and the handing over date. In determining the interest to be applied to the amount of consideration, the Group concluded that the interest rate implicit in the contract (i.e., the interest rate that discounts the cash selling price of the property to the amount paid in advance or at the time of handing over) is appropriate because this is commensurate with the rate that would be reflected in a separate financing transaction between the Group and its customer at contract inception. Determining the timing of satisfaction of revenue from contracting activities The Group concluded that revenue from contracting activities is to be recognised over time because the customer simultaneously receives and consumes the benefits provided by the Group. The fact that another entity would not need to re-perform the services under the contract that the Group has provided to date demonstrates that the customer simultaneously receives and consumes the benefits of the Group’s performance as it performs. The Group determined that the input method is the best method in measuring progress of the contracting activities services because there is a direct relationship between the Group’s incurred cost (i.e., actual cost incurred in the satisfaction of the contract) and the transfer of service and goods to the customer. The Group recognises revenue on the basis of the actual cost incurred relative to the total expected cost to complete the project. Significant influence over an associate The Group concluded that it has significant influence over Palm Hills Development, an associate, even though it holds less than 20 per cent of the voting rights of the entity. The Group holds 12.47% shareholding in the associate and is represented on the Board of the associate with two members out of eleven i.e. 18%. However, through its participation in the decision making process on the Board of the associate, the Group assessed that significant influence is achieved. Property lease classification – Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

75



30 SIGNIFICANT ESTIMATES AND JUDGEMENTS (CONTINUED) Judgements (continued) Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Determination of project progress in contracting activities The Group uses the input method when measuring the progress of the projects and calculating the related contract revenue. Use of input method requires the Group to estimate the costs incurred to date on contracts as a proportion of the total contract costs to be incurred. The accuracy of this estimate has a material impact on the amount of revenue and related profits recognised. Any revision to profit arising from changes in estimates is accounted for in the period when the changes become known. Useful lives of its property and equipment

The Group's management determines the estimated useful lives of its property and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset or physical wear and tear. Management reviews the residual value and useful lives annually and future depreciation charge would be adjusted where the management believes the useful lives differ from previous estimates. Provision for warranty expenses

Provision for warranty expenses is recognised when the contract is completed and handed over to the customer for the period of warranty. The provision is based on historical warranty data and an assessment of all possible outcomes against their associated probabilities. Impairment losses on property, plant and equipment and intangible assets The Group reviews its property, plant and equipment and intangible assets to assess impairment, if there is an indication of impairment. In determining whether impairment losses should be recognised in the profit or loss, the Group makes judgements as to whether there is any observable data indicating that there is a reduction in the carrying value of property, plant and equipment or intangible assets. Accordingly, provision for impairment is made where there is an identified loss event or condition which, based on previous experience, is evidence of a reduction in the carrying value of property, plant and equipment or intangible assets.

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30 SIGNIFICANT ESTIMATES AND JUDGEMENTS (CONTINUED) Estimates and assumptions (continued) Impairment losses on properties held for sale in inventory

The Group’s management reviews the held for sale properties under inventory to assess impairment, if there is an indication of impairment. In determining whether impairment losses should be recognised in the profit or loss, the management assesses the current selling prices of the property units and the anticipated costs for completion of such property units for properties which remain unsold at the reporting date. If the current selling prices are lower than the anticipated total cost at completion, an impairment provision is recognised for the identified loss event or condition to reduce the cost of development properties to its net realisable value. Estimated useful life and residual value of property, plant and equipment The Group’s management determines the estimated useful lives and related depreciation charge for its property, plant and equipment on an annual basis. The Group has carried out a review of the residual values and useful lives of property, plant and equipment as at 31 December 2018 and management has not identified any requirement for an adjustment to the residual values and remaining useful lives of the assets for the current or future periods. This assessment is carried out at each reporting date. Revaluation of property, plant and equipment and investment properties The Group carries its investment properties at fair value, with changes in fair value being recognised in profit or loss. For investment properties, a valuation methodology based on a discounted cash flow (DCF) model is used, whenever there is a lack of comparable market data because of the nature of certain properties. In addition, the Group measures land under property, plant and equipment at revalued amounts, with changes in fair value being recognised in OCI. The land was valued by reference to transactions involving properties of a similar nature, location and condition. The Group engaged an independent valuation specialist to assess fair values as at 31 December 2018 and 2017 for the investment properties and at 31 December 2018 for land under property, plant and equipment. The key assumptions used to determine the fair value of the properties and sensitivity analyses are provided in Notes 8 and 9. Provision for obsolete inventory

The Group reviews its inventory to assess loss on account of obsolescence on a regular basis. In determining whether provision for obsolescence should be recognised in the profit or loss, the Group makes judgements as to whether there is any observable data indicating that there is any future saleability of the product and the net realisable value for such product. Accordingly, provision for impairment is made where the net realisable value is less than cost based on best estimates by the management. The provision for obsolete inventory is based on the aging and past movement of the inventory.

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Notes to the consolidated financial statements (continued) 30 SIGNIFICANT ESTIMATES AND JUDGEMENTS (CONTINUED) Estimates and assumptions (continued) Provision for expected credit losses of trade receivables

The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., product type, customer type and rating). The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Group’s trade receivables is disclosed in Note 29. Provision against claim and contingent liabilities

The Group’s management carries out on a regular basis a detailed assessment of each claim and contingent liabilities that arise during the course of normal business and accordingly makes an assessment of the provision required to settle them. These detailed assessments are based on the past experience of the management in settling these claims and contingent liabilities on commercial terms, weighting of possible outcomes against their associated probabilities. Should the estimate significantly vary, the change will be accounted for as change in estimate and the consolidated financial statements would be significantly impacted in the future.

31 COMPARATIVE FIGURES

Certain comparative figures have been reclassified or regrouped, wherever necessary, to conform to the presentation adopted in these consolidated financial statements. Such reclassifications do not affect the previously reported profit, net assets or equity of the Group.

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Notes to the consolidated financial statements (continued) 32 SOCIAL CONTRIBUTIONS During the year the Group have contributed in the following social contributions:

Contribution natureContribution

type

Contribution

value

Sponsored ABUD Police People of Determination Festival. Cash 50,000

Trained, Engaged and awarded 9 UAE nationals volunteers

including People of Determination in Cityscape 2018. Cash 15,600

Sponsership for Aldhafra Shooting Club. Cash 323,600

Beach Cleaning was organized in coordination with Dubai

Municipality and offering some beverages/water and snacks to

participants and Dubai municipality officials.

In-kind -

Blood Donation is organized on a periodic basis in coordination

with DHA and Latifa Hospital and provided some snacks and

beverages for the attending staff and employees donating

blood on the day.

In-kind -

Dubai Autodrome holds an event every Wednesday between

6pm & 9pm called TrainDubai where the public are able to

safely cycle, run or walk around Dubai Autodrome circuit at no

charge.

In-kind -

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